TOWN HALL chiefs in Manchester face an é18m black hole when government grants are next handed out.

An influential House of Commons committee said the city council would "almost inevitably" miss out on the cash after the 2001 Census suggested a huge dip in population.

Council leader Richard Leese warned the loss - estimated at up to é18.3m for 2003/04 - could recur for for up to 10 years unless the government backs down.

The Commons local government select committee, chaired by Labour MP Andrew Bennett, drew attention to the figure as it slammed the way grants to councils are calculated. It said the fact the formula was so heavily weighted towards population meant that several cities faced hardship.

"The 2001 census figures suggested that the total population of England in April was 1.7 per cent lower than the estimates for 2000," said the committee. "The figures for some individual local authorities show huge reductions in population."

The census, carried out by the Office of National Statistics, claimed Manchester's population had dropped by 46,000, or 10 per cent, compared to previous mid-year estimates.

Vigorous campaign

The government has so far refused to overrule the census figures despite a vigorous campaign by Mr Leese and council chief executive Sir Howard Bernstein.

Town hall officials say local tax records and polls for the electoral register prove the census is wrong.

Mr Leese said: "It is important to remember if this is not changed there will not be another census until 2011. This could be our last chance to put it right."

Mr Bennett's committee urged Manchester and other councils to use all evidence at their disposal to get the government to change its mind.

They pointed out there were many errors in population estimates throughout the 1990s and urged ministers to make sure they were not repeated.

Cuts

Manchester is already facing a major headache having pledged to keep its council tax increase to 2.5 per cent or less.

The council had a budget of é534m in 2002/03 but estimates it would need é590.4m next year to offer the same level of service.

The increase has forced department heads to draw up a programme of cuts.

The government will confirm at the end of this month how much money councils will get for 2003-04.

A spokeswoman for the city council said: "We are vigorously pursuing a revision of the census figures."